China’s PVC capacity to increase 2m tonnes in 2010

MUMBAI (ICIS news)--China is expected to increase its polyvinyl chloride (PVC) capacity by 2m tonnes this year even as demand is growing at a slower pace, an industry analyst said on Tuesday.

"China is already the largest producer of PVC globally with a total capacity of 16.63m tonnes at the end of 2009. Capacity would grow by about 10% this year," Lynn Du, manager of PVC and Inorganics at CBI, said.

Five plants with a total capacity of 1.2m tonnes/year had already been commissioned in the first quarter, Du said.

Xinjiang Tianye would become the country’s biggest producer at the end of this year with a total capacity of 1.2m tonnes/year, she added.

Chinese PVC demand was expected to reach 11.25m tonnes this year, a growth of only 8.7% as the industry had completed rebuilding stocks that were depleted in the second half of 2008, Du said.

Rebuilding of stocks was an important factor contributing to the 15.3% demand growth recorded in 2009.

Despite the overcapacity, China imported about 1.63m tonnes of PVC last year because of low operating rates at many of the small carbide-based plants owing to poor economics. The country also exported 235,700 tonnes.

"Import and export volumes in 2010 will depend on the price gap between domestic and international prices," Du said.

China has levied anti-dumping duties on PVC exports from major suppliers and imports can take place only when international prices are sufficiently low.

Trade volumes will also depend on operating rates at the Chinese plants. Market sources had estimated that Chinese plants ran at just about half of their stated capacity last year because of poor profitability.

However, in a bid to become more competitive, major carbide-based PVC producers are continuing with their expansion plans.

"Producers are looking at building integrated facilities right from calcium carbide to PVC to reduce their costs of production," Du said.

The oversupply situation was also resulting in restructuring of the industry.

Hubei Yihua also acquired a small chlor-alkali plant in Gansu province which was being expanded, Du said, adding that the company recently announced an integrated chlor-alkali and PVC project at Xinjiang.

Hubei Yihua is expected to have a PVC capacity of 1m tonnes/year in 2012.

"Some producers will have to exit; these would be the smaller ones with a high cost of production," she said.

Du estimated that about 35% of the country’s 97 producers had a capacity of 100,000-200,000 tonnes/year while 30% had plants of less than 100,000 tonnes/year.

The other option is to change the product slate.

Some producers located along the coast had shifted from production of suspension PVC to special resins such as chlorinated PVC, Du added.